PNJ Update – HOLD

The retail segment generated 79.7% YoY revenue growth in 2022 thanks to a recovery in consumer demand post COVID-19, network expansion, effective marketing campaigns and digital transformation. By the end of 2022, PNJ had 364 stores (YE2021: 341) in operation, including 343 gold stores (YE2021: 319). We assume the company may keep expanding its store network with 20 net new stores in 2023. Sales of gold bars and high-gold-content products soared by 74.6% YoY in 2022, explained by higher demand for these products as either safe-haven assets or investments/speculation amid inflation and global geopolitical uncertainty. Wholesale revenue also rose by 56.1% YoY in 2022.

The company’s overall gross margin was 17.5% compared to 18.4% in 2021, due to an increased proportion of gold bar revenue and changes in the retail product mix when expanding to tier 2&3 cities. However, a lower SG&A expenses to gross profit ratio (59.1% in 2022 vs 60.8% in 2021) supported its bottom line. PNJ did not face pressure from increases in interest rates given that interest expense contracted by 9.6% YoY in 2022. This was thanks to lower net debt (VND1,464bn at the end of 2022 versus VND2,366bn at the end of 2021) primarily on the back of private placement (VND1,411bn) in 1Q22. Additionally, PNJ has been able to report a relatively low net interest expenses to average net debt in the past years (e.g. 3.9% in 2022, 5.5% in 2021, 5.3%-5.9% in 2016-2019).